Hyundai Steel’s Cold-Rolled Plant Suspension Amid Ongoing Strike
In a significant move, Hyundai Steel, South Korea's second-largest steelmaker by sales, has suspended operations at its cold-rolled steel plant in Dangjin, South Korea. The suspension comes after a monthlong strike by unionized workers, who are demanding substantial pay hikes. The strike, which began over wage disputes, has led to a disruption in one of Hyundai Steel’s crucial facilities.
The company has ceased operations at its pickling line/tandem cold mill (PL/TCM) facility, a vital part of the Dangjin integrated steel mill located approximately 80 kilometers southwest of Seoul. This facility plays a key role in preparing hot-rolled coil by removing oil and rust before converting it into cold-rolled steel products. The suspension has had an immediate impact on the plant, halting cold-rolled steel production entirely.
According to a spokesperson for Hyundai Steel, the plant will remain idle until the unionized workers decide to end the strike. The workers are protesting for more favorable pay terms, and their demands have been at the center of the ongoing dispute between the labor union and the company.
Production Losses and Financial Impact
The strike and subsequent suspension of the plant have resulted in significant production losses for Hyundai Steel. The company estimates that it will lose at least 270,000 metric tons of production, which could lead to a 25.4 billion won ($17 million) loss in revenue. This is a considerable blow to Hyundai Steel, which relies on the production of cold-rolled steel for a significant portion of its output.
The Wage Dispute: Union Demands vs. Company Proposals
The strike began in late January after wage talks between Hyundai Steel and the labor union broke down. The workers are demanding a 159,800 won increase in their basic pay, alongside five months of performance-based salary and a 18 million won cash bonus for the year 2024. This package, if accepted, would be a substantial financial burden for the company.
However, Hyundai Steel has expressed concerns about the union's demands, particularly in light of the company's financial outlook. In response, the company has proposed a more modest pay increase of 100,000 won, along with four and a half months of salary and a 10 million won bonus. Despite these concessions, Hyundai Steel's proposal is far below the union's expectations.
The company has also warned that if the union's demands are met, it could lead to a 98% decline in its annual net profit. Hyundai Steel has projected its net profit for 2024 to be around 8.81 billion won, down significantly from the 443 billion won it earned in 2023. This drastic reduction in profit is largely attributed to the higher pay and bonus demands from the union, which would strain the company's financial position.
Potential Long-Term Effects and Outlook
As the strike drags on, the financial strain on Hyundai Steel is expected to grow, with the cold-rolled steel plant—a vital part of the company’s operations—remaining inactive for the foreseeable future. If the wage dispute is not resolved soon, the company may face continued production disruptions and financial losses.
The outcome of this wage negotiation is crucial for Hyundai Steel as it looks to balance worker demands with the reality of maintaining profitability. The company’s future depends on reaching an agreement that addresses the concerns of the labor union while ensuring that financial stability is not compromised.
Key Takeaways:
• Production Halted: Hyundai Steel has suspended its cold-rolled steel plant operations due to a strike by workers demanding pay increases.
• Estimated Losses: The suspension is expected to result in the loss of 270,000 metric tons of production and 25.4 billion won ($17 million) in revenue.
• Union Demands: The workers are asking for a 159,800 won increase in basic pay, five months of salary in performance-based pay, and an 18 million won cash bonus for 2024.
• Company’s Offer: Hyundai Steel proposed a 100,000 won pay increase, four and a half months of salary, and a 10 million won bonus, which the union rejected.
• Financial Impact: If the union’s demands are met, Hyundai Steel’s net profit for 2024 is expected to drop by 98%, from 443 billion won in 2023 to 8.81 billion won.
• Strike Consequences: The ongoing strike and production suspension continue to put financial pressure on Hyundai Steel, with potential long-term impacts on its operations.
